Introductionthe value of technology that can offer
greater control and visibility over trade
processes becomes ever clearer.
Indeed, the ‘e’ agenda is gaining
increasing support from industry players,
such as chambers of commerce, which in
turn is helping to speed up the adoption
rate. Industry associations such as
Bolero and SWIFT are also helping to
drive change through the creation and
continued improvement of messaging
standards and platforms.
Evidence of market participants working
together and using technology to deliver
better solutions can be seen in the
development by Swift and the ICC of the
Bank Payment Obligation (BPO), which can
be defined as an irrevocable conditional
undertaking to pay, given by one bank to
another. The BPO can also be viewed as
providing the benefits of a letter of credit in
an automated environment, and enables
banks to offer flexible risk mitigation and
financing services across the supply chain to
their corporate customers. By enabling banks
to provide their trade finance customers with
guarantees and other services, but on open
account terms, the BPO clearly has great
potential for Asian trade.
Cash and trade convergence
Another emerging trend is the integration
of cash and trade solutions. This approach
became prominent during the economic
crisis and tougher credit environment.
With the market landscape continuing
to be uncertain, and new regulations
on credit coming into effect, corporates
are increasingly focusing on holistic
management of their working capital.
New tools and solutions are now available
in the market to help corporates achieve this
goal. An integrated solution would enable
corporates to combine their payables and
supplier financing programmes to achieve
greater efficiency and faster realisation
of funds. In this area RBS is one of the
industry pioneers, offering an integrated
solution which allows corporates to manage
their various payments through a unified
delivery channel. Such platforms would
also enable corporates to collaborate online
with their supply chain partners around the
world, driving efficiencies and maximising
working capital.Supply chain financing
Indeed, as the cost of credit rises and the
availability of credit decreases, supply
chain financing (SCF) is becoming ever
more critical. For larger companies, the
ability to leverage their superior credit rating
to support buyers and suppliers during
uncertain times can be crucial to long-term
success, and is also likely to be rewarded,
in the short term, by the ability to negotiate
better payment terms. But it is important to
consider that for every buyer who is taking
advantage of extended payment terms
offered by the supplier, there is a seller
who is holding the buyer’s receivables on
his balance sheet. Receivables purchase
programmes are therefore also an integral
part of supply chain finance and, as Asian
corporates look for new funding sources,
accounts receivable financing is set to
become a more significant source of funding,
especially for smaller companies. Managing
the financial supply chain efficiently and to
best advantage is therefore emerging as a
key tool for corporate success.Looking ahead
With economic conditions likely to remain
uncertain for some time, companies are
looking for expertise and products that can
help them to deliver financial gains in difficult
trading conditions. The uptake of trade
finance solutions therefore looks set to grow,
supported by increased intra-Asian trade.
Fortunately, investment in new technology,
and cross-industry initiatives such as the BPO,
mean that the ability of banks to meet the
evolving needs of the market is also growing.